The truth behind the effective corporate tax rate & why 15% is absolutely doable:
Bottom Line: President Trump's plan to reduce the corporate tax rate to a fixed 15% rate is predictably being met with noise suggesting it's a giveaway to his corporate buddies at the expense of the average American. The top corporate tax rate is 35% so it certainly would seem to be a huge tax cut for corporate America. Even if it were, I could make the economic case for why that'd be of benefit for the Average American, but in this particular case it's actually just a leveling of the corporate tax structure which has allowed bastardized tax code to allow for companies/industry's that are "winners" or "losers". According to the Treasury Department here's the breakout of the average tax rate based on sector in corporate America today:
- Services 28%
- Construction 27%
- Retail 27%
- Agriculture 25%
- Energy 25%
- Manufacturing 22%
- Pharmaceutical 22%
- Insurance 22%
- Information Technology 21%
- Real Estate 20%
- Finance 19%
- Automotive 15%
- Utilities 10%
So what is it that justifies a super low 10% tax rate for the average utility company while the average service provider has to pay an average tax rate that's 18% higher? A BS tax code that's allowed for loop holes which enables winners and losers. None of the disparity in these tax rates can be justified. Some companies/industries just happen to be in prime position to make use of tax loop holes and others aren't. But these are just the averages of larger corporations and don't include smaller businesses with assets under $10 million. By the time you average out all tax rates across all businesses of all types; the average net effective corporate tax rate is...about 14%. The net effective corporate tax rate has varied from a high of 22% to a low of 12.6% over the past decade. In other words, not only is the tax rate doable, it's fair and actually represents a slight tax increase over current net effective rates. But that being said you can expect media/leftists to find an example of a big corporation paying the top rate that would have a significant tax break. That's why I want to arm you with the facts ahead of time.